USD Trading Outlook
AUD/USD The pair was driven down to the 200-HMA in Europe's morning before bouncing towards 0.7710 into NY's open. Bears took control in early NY as the USD continued to claw back post-FOMC losses and talk that the RBA may now act on their own was upped. AUD/USD slid from the open, pierced the 200-HMA and threatened support in the 0.7610 area. The pair remained heavy as pressure was applied from AUD/NZD's slide towards 1.0310/15. Late in the day AUD/USD sat just above 0.7615. Action in Asia may remain limited as the market continues to digest the latest moves. There might be some action though as RBA's Stevens speak in Melbourne. If the AUD comes up in the topic it's likely Stevens will try to jawbone it lower. He may also note the potential for a rate cut after the latest RBA minutes suggested the bank is open to further cuts. AUD/USD is likely to trade soft on that type of rhetoric.
AUD/USD Shorts decided it would be best to cover in NY's morning as positioning was stretched and the Fed risk loomed. AUD/USD sat near 0.7610 into NY's open and bull pressure was applied right out of the gate. Broad based USD weakness aided the pair's lift from the open up to 0.7675 ahead of the fed. A slight dip to the 200-HMA (0.7653) just before the announcement was bought and the pair sat near 0.7670. The Fed's dovish lean intensified the short covering as US yields collapsed and reversed spread narrowing seen earlier in the day. AUD/USD pierced the 21-DMA and hit a high of 0.7752. Very little pullback was seen and the pair sat near 0.7740 late in the day. Longer-term shorts have some concerns now. A bullish outside candle formed today, daily RSI is biased up and yield spreads are widening. With the market still very short a squeeze to the 0.7900/30 resistance zone cannot be ruled out.
AUD/USD A rally in Europe's morning stalled shy of the March 16 high and 200-HMA. The pair slipped from the 0.7666 high & sat near 0.7650 into NY's open. NY applied bear pressure right out of the gate even as housing data was soft. A broad based USD bid drove the pair steadily lower in NY's session. The March 13 low was pierced but follow through was limited as a low of 0.7606 printed. A give back for some of the USD's gains allowed a late day bounce and the pair sat just below 0.7630 into the close. Activity in Asia & Europe is likely to be limited as the market awaits the Feds decision. If the word 'patient' is removed the USD likely rallies. AUD/USD might then try to break the 2015 low. Should that occur the door to sub-0.7200 levels is opened.
AUD/USD Some short covering took hold in Europe's morning and NY added to that bias early on. The pair sat near 0.7645 into NY's open. A series of soft US data prints put the USD on its heels. AUD/USD quickly lifted to the 0.7680 area but no further gains could be made. The USD staged a rally as US bond yields clawed back some losses. AUD/USD slid form the highs and tested near the opening levels. Aiding the slide lower was AUD/NZD trading heavy and probing near 1.0350. AUD/USD remained heavy late in the day and sat near 0.7645. Traders now turn their attention to the RBA minutes for hints of future policy action. Any impact might be limited though as the FOMC on Wednesday garners most of the markets attention for now..
EUR/USD Dips were bought in Europe and EUR/USD sat near 1.0525 into NY's open. Short covering in NY saw bull pressure applied right out of the gate. The lift got an added boost as Empire Mfg and US IP data were on the soft side. Bears scrambled to cover as thoughts that the Fed might leave 'patient' in their language on Wednesday were upped. The lift pierced 1.0600 and eventually extended to a high of 1.0620. Leveraged names were the noted buyers and macros contributed to the rally a bit as well. Some of the pair's gains faded in the afternoon as the USD rallied on a rebound in US bond yields. late in the day EUR/USD sat near 1.0585. EZ Feb CPI and Germany's March ZEW are the big risks for the upcoming session. Above forecast results could see the short squeeze go a bit further. Big gains are unlikely though as the market won't get overly aggressive ahead of the Fed.
USD/JPY Subpar US econ data and slight slippage in Tsy yields were not enough to pull USD/JPY below importer and spec bids into 121.00. With US and other equity markets, particularly the N225 futures, on the rise and USD-JPY 2-yr yield spreads a shade higher today, USD/JPY erased its early NY losses and is roughly unchanged on the day, but still below Fri & Thur's highs. The BOJ meeting ends this evening and QQE2 is expected to be voted extended without much resistance. If the major wage agreements due to be announced on Wed are generous by recent historical standards, it will give the BOJ a bit more breathing room on the reflation front. Reports o/n that the GPIF's head, Mitani, will not be replaced and that no big policy board is imminent, should play into the GPIF et al asset reallocation trend that has favored USD/JPY longs and yen shorts in general. All eyes are on the Fed for any signs it is more or less likely to tightening midyear or in Sep, as the rising USD has been a major component in the USD/JPY rise since the QQE2 shock wore off at year-end. EUR/JPY retraced 38.2% of the Mar 10-13 drop w today's 128.81 high.
Our preference: Short positions below 0.7675 with targets @ 0.7605 & 0.7555 in extension.
Alternative scenario: Above 0.7675 look for further upside with 0.772 & 0.7745 as targets.
Comment: The RSI is mixed and calls for caution. The pair is rebounding and is challenging its resistance, caution.
Supports and resistances:
AUD/USD The pair slipped in Europe after the 10-DMA capped any gains overnight. NY walked in with the pair near 0.7665. Bear pressure remained in NY as the USD was firm early on. Short-term support near 0.7640/45 was eventually cleared and the pair's slide accelerated on that break. Overall risk-off sentiment had JPY strength push AUD/JPY down near 92.30. AUD/USD followed lower with soft commodities putting the wind at its back. The pair hit a session low of 0.7610 and saw very little bounce as it sat near 0.7620 late in the day. There is no major Oz data next week. RBA's Debelle speak March 16 and is likely to try and talk AUD down if the currency comes up. Traders will be looking to the Fed for the big risk though. If the Fed keeps market expectations for a hike intact even after some soft US data, AUD/USD should remain under pressure. We might then see the March low broken and the pair make a run towards 0.7180/0.7240 support.
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